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By Julian Matthews

August 18, 2000

Asian B2B will grow despite US correction

Nasdaq-listed Internet Capital Group has taken stakes in over 70 B2B players in three years. It is now pushing into Asia and just announced three maiden acquisitions through regional vehicle ICG AsiaWorks Ltd, a joint-venture with Hong Kong conglomerate Hutchison Whampoa.

Victor Hwang, ICG AsiaWorks deputy chairman and CEO, in an exclusive with ZDNet Asia explains why he believes Asian B2B companies are still ripe for the picking.

ZDNetAsia: The dotcom IPO boom in US that began two years ago seems to have finally caught on in Asia. As one of the early players in funding such companies what is your take on Asian B2B plays and the recent lukewarm reception of IPOs of Chinese portals and Is the bubble bursting even before it's begun?

Hwang: Firstly, let me explain ICG AsiaWorks is not a traditional venture capital company but a holding company focused on acquiring and building Asian-based e-commerce companies. We also bring additional operational resources to actively assist our existing partner companies in the US expand here.

Unlike VCs, we look far beyond the IPO to build large, successful companies over the longterm.

We see the recent market corrections as a potential opportunity to take larger stakes in the companies we like. Those market conditions have not affected ICG's strategy. B2B e-commerce adoption is still in its early stages in Asia. In our view, a major shift to Internet-based commerce among businesses is inevitable and not too far off. We're looking at a US$400 to US$700 billion opportunity!

On and, they are B2C portals. The market opportunity for B2B is different and much more significant. Forrester Research's Asia Pacific (ex-Japan) forecast is $715 billion for B2B online trade by 2004. That's about 13 times their estimate for B2C trade. Not only is the B2B market opportunity larger, it will create better businesses. B2B is about software, systems integration, ASP, outsourcing services, and digital exchange companies. These are companies which will develop deeper switching costs, greater top line growth, superior profitability and superior value relative to B2C.

ZDNetAsia: "First-mover advantage" is often the main reason dotcoms offer when they attempt to aggressively grow their business in the region. Do you think American companies planning such expansion may now hold back and funds needed for such growth will dry up, given current conditions?

Hwang: We believe world class B2B companies will be successful in Asia. ICG AsiaWorks itself is a first-mover in Asia and we're expanding rapidly. We are capitalizing on the Asian B2B opportunity by bringing our leading partner companies to the Asia Pacific and identifying appropriate acquisition targets in the region. We have a strong balance sheet to fund our expansion and acquisitions, and believe capital markets funding will be there for the companies who offer differentiated solutions, have proven track records, management strength and depth to execute.

We believe there is no better time to aggressively enter the market and the opportunity is now to seize B2B in Asia.

ZDNetAsia: Which countries are your target markets in Asia?

Hwang: ICG AsiaWorks' charter is to build five to ten companies that will each eventually command market caps in excess of US$500 million. Our strategy is to focus on leading infrastructure companies and market-makers. Those companies can be based anywhere in Asia - we are agnostic over location. But we are focused on large markets with fragmented players. So, we will look for supply chains that target the global markets, pan-Asian markets and large domestic markets, such as China and India. Our priority is countries that have widely adopted information technology infrastructure such as Australia, Singapore, India and Hong Kong for infrastructure-related investments and Hong Kong, China, Korea and India for B2B exchanges.

Published in ZDNet

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